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Journey of Homeownership

ABOUT THE AUTHOR: Emma Marie is a mother, wife, avid reader, educator and Team Neal client. She has lived in and loved four different houses since beginning her journey into home ownership. One ended in foreclosure (and a divorce), one was a fixer-upper, one was a total renovation (and almost ended in a second divorce), and her current one is perfect just the way it is. Along the way, Emma has learned a little bit about the mortgage process and her goal in writing this blog is to give others a better understanding of the complicated but rewarding process of purchasing and financing a home.

Shopping is fun and shopping for a house is no exception. Driving around neighborhoods, searching local listings online, and looking at interior photographs are all great ways to become informed about the real estate offerings in your area. But when you get ready to seriously shop for a home with the intent to purchase, your selection process needs to be precise so that you don’t fall in love with a house that is outside of your budget.

That’s where pre-qualification comes in. It is the first step in purchasing a house, something to do even before you contact a realtor. In fact, some realtors won’t even show you a house if you aren’t pre-qualified. The process is fairly simple (think income, assets, debts) and allows a mortgage company to determine the maximum amount of money they’ll loan you so that you’ll know what homes are within your budget. Once a lender pre-qualifies you, you will get a letter that provides your realtor with this information to help facilitate the home selection process.

Being pre-qualified also enables you to make an offer on a house so that when you do find the house of your dreams, you’ll be ready. Oftentimes, the seller looks at the pre-qualification letter to decide whether or not they want to accept the offer. In a hot market where sellers receive multiple offers on a house, the terms of the loan outlined in the letter and the mortgage company that issued it are often taken into account when deciding which offer to accept. Sellers want to ensure that the sale isn’t going to fall through because of the buyer’s financing and a strong pre-qualification letter is a good way to show the seller that you are serious.

The mortgage experts at Team Neal can walk you through the pre-qualification process. There will be some paperwork and they will ask for information about your income and expenses to evaluate what amount will work with your budget. Then they will take the information you provide and use it to get an idea of how much money a bank will loan you for a house. This will help you narrow your search and be ready to make an offer when you do find the house that’s perfect for you.

I shudder to think about the first time I purchased a house. I was no more than twenty-one years old, in my first marriage, and remarkably uneducated about the world of finance. My now-ex-husband and I drove by a development one day, decided to stop, and ended up signing a contract for a house. (I do not recommend making such a large, life-changing purchase on a whim. This was pretty much our MO-- it’s not surprising that this marriage self-destructed.) The house was nice enough, but neither of us knew the first thing about home purchasing or ownership.

After the nice saleslady talked us into signing a contract on the yet-to-be-built home of our dreams, she told us that we would get a discount if we used one of their in-house lenders. A discount? On a house? Sign us up! We knew nothing of the terms of the loan. Words like “points” didn’t mean a thing to us. We were buying our first home and this lender was making it happen. As I mentioned earlier, we didn’t do a very good job of thinking long-term. What a mistake!

Fast-forward seventeen years to today. If I see a pair of shoes that I want, I put in the research looking for coupons, watching the sales, cross referencing the price with other stores (the internet makes it so easy!). Buying a home is quite possibly the biggest purchase that you and your family will ever make. It’s definitely worth the time and consideration to shop around and understand your mortgage. I know, I know-- it can be confusing. Shoes, sales tax, percentages off of retail isn’t that complex. A mortgage is incredibly complex. That’s why you need a good mortgage agent who will take the time to answer your questions and custom-tailor your mortgage to fit your needs. It doesn’t cost any more to go this route; in fact, it will more than likely save you money in the long term.

One day not too long ago, I was having lunch with one of my very good friends. We’ve known each other since Kindergarten and have gone through all the major phases of our lives together. She and her husband were in the process of buying a new home for their family and she was telling her frustrations. It was stressful enough finding the perfect house and getting a reasonable offer accepted, she was telling me. Now they were having issues with their lender-- he wouldn’t return their calls, their closing date kept getting pushed back, and they had lots of unanswered questions. I told her that she should give Team Neal a try. “Can I even change lenders this far in the process?” she asked. I told her to give them a call and find out.

After taking to Team Neal, my friend called me and told me how happy she was with their services. Their closing date was moved up and their monthly mortgage payment was going to be over $200 less than her original lender had told her. Team Neal used their “boutique” mortgage services to customize a mortgage for my friend’s family’s needs. Rather than just plug numbers into a formula (something a lot of lenders do), Team Neal takes the time to figure out what works best for each of their individual clients’ needs. And that makes all the difference.

I’ve made my fair share of bad decisions, and most of these I attribute to being young. I was twenty-two when I filed for bankruptcy and two years later, when my then soon-to-be (and now current) husband and I realized that it was time to buy a house, my credit score was 480. After a divorce, I had spent two years rebuilding relationships and atoning for my errors in judgement, but I neglected to consider rebuilding my credit. This left me with a credit score that labeled me as someone who was not to be trusted with money.

Still, somehow I was lucky enough to find Team Neal and make that fateful phone call. Rather than scorning me for being a terrible person with terrible credit, the mortgage professionals there gave me direction and helped put me on the path to good credit in just a few simple steps.

The first thing I had to understand was that just as I didn’t get myself into this situation overnight, I wouldn’t be able to repair it overnight. In fact, it took me about eighteen months of following their advice to rebuild my credit.

The Golden Rule of rebuilding your credit is: pay your bills! If you bought something or signed a contract for a service, pay for it. Nothing is free. If you’re spending more money than you’re making, it’s probably a good idea to look at where your money is going and develop a budget.

So I was paying all of my bills on time to rebuild my credit, but that wasn’t enough. What I really needed was to open a line of credit so that I could prove myself. Only problem is, with such a low credit score and not-so-stellar past, no bank was going to trust me with a line of credit. That’s when Amy at Team Neal told me how to open a secure credit card. The way it works is I give the bank money (not too much- I did $300) and they give me a line of credit (for $300) . I had to pay a monthly fee for this service, so it’s pretty much like I’m paying the bank to hold my money and give me credit because they don’t trust me. But after about twelve months of using this secure line of credit, I saw a big improvement in my credit score with my good payment history.

There were a few other pointers that Amy gave me about credit cards. One big one is to use the credit card to show activity, but keep your balance to credit line ratio at 30% (ie. if you have a $1000 limit, keep your balance at $300 or less). Another pointer is to not pay old collections without consulting your mortgage professional. If you do, it may make them seem current (remember your credit score is primarily based on the past twelve months).

These tips and strategies are what worked for me. For a customized strategy that is tailored to your personal situation, contact Team Neal. The sooner you begin, the better.

Here’s the thing about credit-- it’s a system built on trust. It’s the same basic concept as personal relationships: if someone tells you they are going to do something and then they don’t do it, you lose a little bit of trust in them. With a little bit of grace, we can overlook these small transgressions every once in awhile, but if they become frequent enough, trust is eroded.

It’s also the same with no credit. When you first meet someone, you usually don’t distrust them (unless they’re super creepy and then always trust your intuition) but you don’t trust them either. Real trust is built on time and history, and if you have no credit, there’s no history there. If you’ve never borrowed money you’ve never showed that you can and will pay it back. It’s not a bad thing, but it’s not a good thing either.

While I am by no means an expert on credit, my personal experiences over the years have taught me a lot. My ex-husband had terrible credit when I met him (should have been a blazing red flag) and he wasted no time opening several lines of credit in my name. When I was 22, I decided to leave that disaster of a marriage and ended up filing bankruptcy. The house that we had bought together ended up in foreclosure within the year. When I called Team Neal two years later, my credit score was a whopping 480.

The credit rating system gives a person a numerical score based on how much they “trust” them. The credit rating scale runs from 350 to 850; any score under 600 needs work (under 500 is pretty horrible). Your credit score is primarily based on the past twelve months; the past twenty-four months are also considered. The better your credit score, the better rate you’ll get on your mortgage and the more options you’ll have.

All of this comes into play when you decide to buy a house because you are basically asking a bank to trust you with their money. They’ll loan you the money and you promise to pay it back. They don’t know you from Adam- this is where your mortgage professional comes into play. Of course, this is an oversimplification of the process and I am not a mortgage professional, so be sure to contact Team Neal if you have any questions. Credit can be tricky and the more informed you are, the better off you’ll be.

Living in an apartment used to be fun-- no unexpected maintenance costs, no yard work, a little bitty space to keep clean. When I was in college and just venturing out on my own, the idea of my own personal space apart from my parents was something that I aspired for. An apartment meant independence and offered a community to live in among other independent people like me. It was great.

But then I met a guy (who is now my husband) and we started thinking about the future. We started thinking long-term: children, pets, even school zoning. Suddenly apartment living wasn’t so attractive. We wanted more: a house in a good neighborhood with a good yard and friendly neighbors. American dream type stuff.

Could we even buy a house? After a not-so-well-thought-out marriage at nineteen years old that ultimately ended in a divorce and financial ruin, my credit was not so shining. My soon-to-be husband had no credit: something almost equally as bad. Would a bank trust us with a hundred-thousand of their dollars to buy a house with? We are both college-educated professionals with good, stable incomes, but we assumed that our past experiences (or lack thereof) with credit would mean that we were doomed to live in an apartment forever.

In spite of our misgivings about ever being able to purchase a house, I decided to make a phone call to a mortgage team. The worst they could do was confirm my fears, right? Boy was I wrong. To this day, I am so glad that I made that one phone call because it put us on the path to homeownership.

While we weren’t able to buy a house right away, the mortgage representative put us on a plan to get our credit into shape so that we could one day buy a house. While we weren’t able to buy a house that month or even that year, the tips and information that I learned put us on the right path. Under the guidance of a mortgage professional, I learned how to rebuild my credit, budget our money, and make sound financial decisions so that we could one day purchase and own a home.

We ditched the apartments for about twelve years now. Home ownership is the best. Sure, there’s the occasional unexpected expense like when our water heater died last month, but that’s okay because it sure beats living in an apartment. If you’re unsure about whether or not you can buy a home, I encourage you to make the phone call. Find a good mortgage representative that will take the time to help you. I recommend Team Neal in North Texas. That’s who put us on the right path and we’ve trusted them since I made that phone call twelve years ago.